Huobi CEO Li Lin said on Tuesday that he will use 100 million CNY to compensate users for their investment losses in the WAX project.
A Pump-and-Dump Incident
Huobi.pro launched an ICO token, WAX, on December 20. The opening price of the token was about 10,000 CNY (0.09 BTC) and was pumped up to over 40,000 CNY (0.36 BTC) on the very first day, gaining 6,000% more than its ICO price (6.6 CNY). Users at Huobi felt excited to buy more WAX, believing that the token could be the star of 2017 in the crypto world. But their investment turned out to be a disaster, as the price fell in the following five days to as low as 2 CNY per WAX.
When the price dumped, and enthusiasm declined, investors began to do their homework. They noticed that Huobi.pro deleted the project overview and whitepaper of WAX on its website by the 22th. Worse still, when they visited the WAX blog, they realized that Huobi.pro under-reported he total amount of WAX in circulation. On its website, Huobi said WAX was capped at 180 million in total, but investors claim to have discovered a ten-fold inflationary 1.8 billion total in WAX.
News.bitcoin.com entered a Huobi.pro Telegram group and found that some investors even bought WAX at the highest price of 0.36BTC. Group members subject to losses formed an alliance to collect evidence that Huobi.pro deliberately manipulated the token price. So far, over 100 investors went public with their real names and have reported Huobi.pro’s potential misconduct to local police.
Huobi’s Two Announcements
On their website, Huobi announced on 24th:
“The WAX project suddenly increased their token size without informing users and the platform, we will do our best to assure they compensate our users.”
The announcement was deleted right away. Later that night at 9:00pm, Huobi.pro released another announcement, saying WAX is a promising project that met all conditions to be listed at Huobi.pro. “The Wax team made the expansion split, and the original total amounts split to ten-fold, about 1.85 billion. In the Medium post, the Wax project announced that the change was for smaller deals which will support more applications in the future. This change was from WAX’s blog, but the WAX team had not informed Huobi Pro through a formal business procedure,” says Huobi.pro. “And the Wax team has indicated that they are willing to compensate users’ loss due to the temporary expansion. Huobi Pro will also make compensation to the users who are affected by this split. And the specific compensation details are still under negotiation.”
Questions Remain Unanswered
But investors have more questions about this potential pump-and-dump incident. WAX ICO participants revealed that they didn’t receive any WAX until 21st. If true, who was it selling WAX a full day before? What kind of role did Huobi play?
Instead of answering these questions, Huobi CEO Li Lin on the 26th announced that the company would spend 100 million CNY to compensate WAX investors. He said, “Huobi will always puts users first. I, as operations department of Huobi.pro, should learn from the incident to better service our users.” WAX price increased 17.55% in reaction to the announcement.
What do you think of the pump-and-dump? What role did Huobi play in the incident? Let us know your comments below.
Images courtesy of Shutterstock, Huobi.pro.
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Author: Cindy Wang